Slowing growth in UK construction market shows lack of capacity, not work, says expert

The Construction Purchasing Managers' Index (PMI) by analysts Markit and the Chartered Institute of Procurement and Supply (CIPS) showed continuing market growth with a PMI figure of 57.6. This was down from November's 59.4 score, but still well above the long-running series average of 54.5 and the 50.0 figure that indicates no change.

Construction industry expert Chris Hallam of Pinsent Masons, the law firm behind Out-Law.com, said that there was "no reason for the industry to panic".

"The construction sector is still growing, just not as quickly as it has in recent months," he said.

"This is not so much caused by a slowdown in demand; it is more a question of the industry struggling to meet that demand. The construction industry lost hundreds of thousands of jobs in the recession and is yet to recover to the levels of output reached in the peak years of 2007 and 2008. That massive downsizing has left businesses insufficiently staffed to deal with the current demand," he said.

Hallam said that construction growth would continue to rise over the coming years, although for this to happen it would be "critical" for the government to "keep its nerve and plough on with its commitments to invest heavily in the UK's infrastructure - whatever form it may take after the May election".

PMI data is collected via a monthly survey of more than 170 purchasing executives working within the construction sector, based in businesses of all sizes. The survey measures changes in activity in relation to output, orders, staffing levels and market optimism; across the broad sub-sectors of house building, civil engineering and commercial construction.

According to the results of December's survey, house building remained the strongest performing sub-category of construction activity; while commercial construction also increased. However, civil engineering construction activity decreased for the first time in 17 months. Companies reported a solid increase in new business volumes during the month, although the rate of overall new order growth fell for the sixth successive month to its weakest level since June 2013.

Purchasing managers also reported a further rise in staff recruitment during the month, albeit at a slightly less marked rate than in November. A number of firms also highlighted worsening skill shortages and a "sharp and accelerated" decrease in sub-contractor availability. Related to this, sub-contractor pay increased at the second fastest rate since records began in April 1997, according to the survey.

"The sector is still expanding with the index posting at a higher level than the longer-term average, and led primarily by residential development – but it has become a victim of its own success as it struggles to keep up with its own speed of recovery," said David Noble of CIPS, one of the authors of the report. "With increases in new business comes pressures on the availability of talented staff and a squeeze on the performance of supply chains."

Noble said that the industry was "enjoying lower commodity prices" as a result of falling oil-related prices, which helped to balance out some of the increased costs of sub-contractors and replacing lost skills.